Shell Exits Mongolia
Royal Dutch Shell issued an Exit Notice to UK-listed Petro Matad's 100% owned subsidiary, Central Asian Petroleum Corporation Limited, on April 28 exercising the exit option under the Farmout Agreement dated 7 April 2015 – originally signed by BG Group, now part of Shell – and therefore withdrawing from the Block IV and V production-sharing contracts {PSCs) in west/central Mongolia.
"The decision by Shell is based on optimisation of its own portfolio and it is not related to the technical prospects for the blocks; the exit is subject to Mongolian government consent," said PetroMatad on April 29. It noted that, as required in the agreements, Shell will pay an amount of compensation to Petro Matad's subsidiary as a result of its exit decision, "such amount being highly material to the PetroMatad". Shares in the tiny company increased by over 200% to 7p per share. Petro Matad's working interest in the two PSCs will revert to 100% from the 22% currently held.
Last year BG committed to cover Petro Matad’s portion of the $28mn work program in return for a 78% stake in the two PSCs. Petro Matad now has said it will continue to execute the work program as planned and that its seismic contractor is mobilising to the field and will soon begin the second phase of the planned seismic acquisition programmes in Blocks IV and V, which have an area of 28,900 km2 and 21,100 km2 respectively and are in southwest Mongolia. Its website said there was "significant oil shale potential documented" on block IV.
Mark Smedley